Improving Supply Chain Performance and Managing Risk Under Weather-Related Demand Uncertainty

• 成果类型: Article
• 署名作者: Chen, Frank Youhua; Yano, Candace Arai
• 署名单位: Chinese University of Hong Kong; University of California System; University of California Berkeley; University of California System; University of California Berkeley
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1100.1194
• 发表日期: 2010
• 页码: 1380-1397
• 关键词: weather-linked rebate; weather risk; weather derivatives; supply chain coordination

摘要

We consider a manufacturer-retailer supply chain for a seasonal product whose demand is weather sensitive. The retailer orders from the manufacturer (supplier) prior to the selling season and then sells to the market. We examine how a manufacturer can structure a weather-linked rebate to improve his expected profit. The proposed class of rebate contracts offers several advantages over many other contract structures, including no required verification of leftover inventory and/or markdown amounts, and no adverse effect on sales effort by the retailer. We provide a thorough analysis of the manufacturer's and retailer's decisions in this context. We show that the weather-linked rebate can take many different forms, and this flexibility allows the supplier to design contracts that are Pareto improving and/or limit his risk in offering the contract and the retailer's risk in accepting it. For weather rebates with certain characteristics, the manufacturer can fully hedge his risks of offering a weather rebate by paying a risk premium; we show how this can be accomplished. We also show that the basic structural results extend to settings in which the two parties would like to limit their risk.